According to Burnham's research, the San Diego County industrial vacancy rate stands at 7.4%, which is the lowest level reported here since 1997. The vacancy rate for multi-tenant space is 4.7%, while the warehouse sector has reported a level of 9.3%. "Industrial vacancy has remained stable in the 8% range for the past three years," says Mickey Morera, a Burnham vice president. "This is due in large part to the fact that there is very little excess supply in this product sector."

As the statistics show, San Diego does not have a problem with overbuilding of industrial product. In 2002, 1.6 million sf of inventory was added to the market and an additional 1.8 million sf is currently under construction, the Burnham report says. Of those projects currently being built, 80% are already committed to build-to-suits or owner-users. The 2002 figure is significantly less than the 14.9 million sf of new industrial space that was added to the market from 1997 to 1999.

As far as the next year is concerned, there is little new inventory predicted for the industrial market. The same holds true for the R&D market, which currently has a 10% vacancy rate and only 294,000 sf of space under construction. "The lack of new development will put significant upward pressure on industrial rental rates for existing space over the next 12 months," Morera says.